How to get paid on time – 7 tips
Posted on by Cindy Yip
Estimated read time: 4 mins
Cash flow is the life blood of your business. You could be hitting all your revenue targets but if you haven’t got any cash in the bank then you can still get into financial trouble.
New Government regulation from April 2017 requires all large companies and limited liability partnerships (LLPs) to publicly report their payment practices, including average time taken to pay supplier invoices. Small Business Minister, Margot James said “The UK is home to a record 5.5 million small businesses and the industrial strategy will help address many of the challenges they face getting finance and scaling up. It’s completely unacceptable that small and medium-sized businesses are owed £26.3 billion in late payments, which hampers their ability to grow and has no place in an economy that works for all.”
Managing your cash flow needn’t be tricky. It’s just a case of keeping track of what is coming into your business in the form of revenue versus what’s going out in the form of bills, wages and other expenditure. If you have more money coming in, then your cash flow will remain positive and your business can continue to thrive. It’s good practice to forecast and plan your cash flow so you can see in advance what money you will need to spend, what money is owed to you and therefore, what you have available to invest in developing your business. One key factor that impacts cash flow is getting paid – and getting paid on time! If your customers pay late (or not at all) then all your careful planning and forecasting goes out the window…
Of course, there are steps that you can take which will improve your chances of being paid on time…
1 Credit Check
It’s now easier than ever to check the financial history of a customer before you work with them. Services such as Experian Business Express allow you to credit check both UK and international companies to assess if they will meet their financial commitments and lending requirements.
2 Set expectations up front
Decide beforehand when you want to be paid. This should be based both on when you need to be paid to meet your own financial obligations, but also considering your industry and what a realistic and reasonable payment time will be. Once you have decided your payment terms, make sure you communicate these clearly to your customer.
3 Consider offering payment plans
This can have two advantages. It makes it easier for your clients to spread their costs and maintain their repayments to you and it also spreads out the money you have coming in so you have regular, consistent income rather than sporadic lump sums.
4 Invoice promptly
Don’t create hold-ups at your end by sending your invoices through late!
5 Make it easy to pay you
Allowing online payments makes it easier for your clients and means that the funds will hit your account sooner.
6 Use the carrot and the stick
By offering incentives for early payment and enforcing penalties for late payments, you can encourage your clients to prioritise your invoices.
7 Let accounting software do the hard work
These days you can get software that will automate your invoices. It’s also possible to set up email reminders. Save your self time and automate as much as possible!
By following the tips above, you’ll be much more confident of being paid on time and keep your businesses’ cash flowing! Get started today. See how company credit checks can help your business – visit Experian Business Express and get a free trial of our easy-to-use service today.